MEDICAID 

MANAGED CARE

Use of Limited Benefit 

Plans to Provide 

Mental Health 

Services and Efforts 

to Coordinate Care

Report to Congressional Requesters

September 2013

GAO-13-780

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-780, a report to 

congressional requesters

September 2013

MEDICAID MANAGED CARE 

Use of Limited Benefit Plans to Provide Mental 

Health Services and Efforts to Coordinate Care

Why GAO Did This Study

Medicaid is the largest payer of mental 

health services in the United States 

and Medicaid spending on such 

services is likely to grow. Some states 

provide mental health services to 

Medicaid beneficiaries separately from 

physical health care services through 

contracts with limited benefit plans, 

which are paid on a per person basis 

to provide a defined set of services. 

While using these plans to provide 

mental health services may control 

costs, it can also increase the risk that 

these services will not be coordinated 

with physical health care services. 

Coordinated care is important for 

Medicaid beneficiaries with mental 

illnesses because they are more likely 

than others to have ongoing health 

conditions. GAO was asked for 

information on states’ use of Medicaid 

managed care. In this report, GAO 

examined the (1) extent that states 

provide mental health services through 

limited benefit plans, and (2) steps 

states and CMS have taken to facilitate 

the coordination of mental and physical 

health care services for adult 

beneficiaries enrolled in these plans.

GAO collected information on 

enrollment, payments, and services 

from the 13 states that contracted with 

limited benefit plans to provide mental 

health services to adult beneficiaries. 

GAO also selected 4 states based on, 

among other criteria, the number of 

beneficiaries enrolled in limited benefit 

plans. GAO reviewed documents from 

the 4 states and CMS, and interviewed 

officials to identify steps taken to 

coordinate care.

The Department of Health and Human 

Services provided technical comments, 

which GAO incorporated, as 

appropriate. 

What GAO Found

Thirteen states reported that in fiscal year 2012 they paid a total of about 

$5.6 billion to limited benefit plans to provide mental health services to about 

4.4 million adult Medicaid beneficiaries. States can enroll different populations—

such as adults who are blind, disabled, or have developmental disabilities—in 

limited benefit plans, which could contribute to the variation in the number of 

adults enrolled and level of capitated payments made across the 13 states.

Number of Adult Medicaid Beneficiaries Enrolled in Limited Benefit Plans Providing Mental 

Health Services, Fiscal Year 2012

Four selected states—Florida, Kansas, Michigan, and Washington—took three 

steps to facilitate the coordination of mental and physical health care services:

1. incorporating care coordination requirements in limited benefit plan contracts; 

2. implementing additional steps to coordinate care, such as policies that 

included incentives to coordinate care; and

3. monitoring limited benefit plans’ implementation of care coordination. 

GAO found that the Centers for Medicare & Medicaid Services’ (CMS) did not 

take direct steps to facilitate care coordination, because its role is to oversee and 

provide technical assistance. In its oversight role, CMS reviewed and approved 

state submitted documents, such as contracts with mental health limited benefit 

plans, some of which contained care coordination requirements.

View GAO-13-780. For more information, 

contact Carolyn L. Yocom at (202) 512-7114 

or yocomc@gao.gov.
Page i GAO-13-780 Medicaid Managed Care and Mental Health

Letter 1 

Background 4

Enrollment, Payment, and Scope of Services Varied Across All 13 

States Using Limited Benefit Plans for Mental Health Services 6

Selected States Generally Took Three Steps to Facilitate 

Coordination of Care, and CMS Reviewed Waivers and Contracts 9

Agency Comments 16

Appendix I Summary of Selected States’ Use of Limited Benefit Plans 

to Provide Mental Health Services, Fiscal Year 2012 18

Appendix II Adults Enrolled in Medicaid and Limited Benefit Plans 

Providing Mental Health Services, Fiscal Year 2012 19

Appendix III Total Medicaid Payments and Capitated Payments to Limited 

Benefit Plans for Adults, Fiscal Year 2012 20

Appendix IV GAO Contact and Staff Acknowledgments 21

Table

Table 1: Scope of Services Provided by Limited Benefit Plans by 

State, Fiscal Year 2012 9

Figures

Figure 1: Number of Adult Medicaid Beneficiaries and Number of 

Adult Medicaid Beneficiaries Enrolled in Limited Benefit 

Plans Providing Mental Health Services, Fiscal Year 2012 7

Figure 2: Percent of Total Medicaid Payments to Limited Benefit 

Plans Providing Mental Health Services, Fiscal Year 2012 8

Contents 
Page ii GAO-13-780 Medicaid Managed Care and Mental Health

Abbreviations

CMS Centers for Medicare & Medicaid Services

EQR External Quality Review

EQRO External Quality Review Organization

PAHP Prepaid Ambulatory Health Plan

PIHP Prepaid Inpatient Health Plan

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Page 1 GAO-13-780 Medicaid Managed Care and Mental Health

441 G St. N.W.

Washington, DC 20548

September 30, 2013

The Honorable John D. Rockefeller, IV

Chairman

Subcommittee on Health Care

Committee on Finance

United States Senate

The Honorable Henry A. Waxman

Ranking Member

Committee on Energy and Commerce

House of Representatives

Medicaid, a joint federal-state program that finances health insurance 

coverage for certain categories of low-income individuals, is the largest 

payer of mental health services in the nation. Many of the 67 million 

beneficiaries enrolled in Medicaid have mental health care needs.1

Between 1998 and 2009, Medicaid spending on mental health services 

increased from about $16.5 billion to $39.1 billion.2 Spending for mental 

health services in Medicaid is likely to continue growing as millions of 

individuals become eligible to receive Medicaid coverage under the 

Patient Protection and Affordable Care Act.3

 

1

Medicaid enrollment is for 2010, see Centers for Medicare & Medicaid Services, 

Medicaid Enrollments and Payments, USA, FY 2006-2010, Medicaid Statistical 

Information System and Medicaid Financial Management Report, accessed June 19, 

2013,

We previously reported that 

Medicaid beneficiaries sometimes experience challenges accessing 

http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-State/ByState.html. 

2

The Patient Protection and Affordable Care Act required all states to expand eligibility for 

Medicaid to nonelderly individuals whose income does not exceed 138 percent of the 

federal poverty level by January 1, 2014; however, the Supreme Court has ruled that this 

expansion is optional. Pub. L. No. 111-148, § 2001(a)(1),124 Stat. 119, 271 (Mar. 23,

2010); National Federation of Independent Business v. Sebelius, 132 S. Ct. 2566 (2012). 

See Substance Abuse and Mental Health Services Administration, National Expenditures 

for Mental health Services & Substance Abuse Treatment, 1986-2009, HHS Publication

No. SMA-13-4740 (Rockville, Md.: 2013).

3

See Congressional Budget Office, Estimates for Insurance Coverage Provisions of the 

Affordable Care Act Updated for the Recent Supreme Court Decision (Washington, D.C.: 

July 2012).

 
 

Page 2 GAO-13-780 Medicaid Managed Care and Mental Health

mental health services.4

The Centers for Medicare & Medicaid Services (CMS), within the 

Department of Health & Human Services, is the federal agency 

responsible for overseeing the Medicaid program. Within broad federal 

requirements, states administer the day-to-day operations of their 

Medicaid programs and provide services to Medicaid beneficiaries 

through a variety of health care arrangements. Some states have elected 

to provide mental health services separate from physical health care 

services through limited benefit plans, which are managed care 

arrangements designed to provide a narrowly defined set of services. 

Under limited benefit plans, states make capitation payments—a fixed 

dollar amount per Medicaid beneficiary—for a specified set of services.

For some populations, such as individuals with 

complex health care needs, accessing mental health services can be 

especially problematic.

5

You requested information on states’ use of managed care to deliver 

health care services to Medicaid beneficiaries. We previously issued a 

report examining variation in states’ use of managed care and reported 

concerns about the availability of information on limited benefit plans.

Through the use of limited benefit plans, states seek to ensure a ready 

source of providers, control costs, and improve quality of care through 

better management of beneficiary needs. Separating mental and physical 

health care services increases the risk that these services will not be 

coordinated; yet, little is known about how states and health care 

providers coordinate care for beneficiaries enrolled in limited benefit 

plans.

6

 

4

We found that states frequently reported having difficulty ensuring a sufficient number of 

Medicaid providers for psychiatric services. See GAO, Medicaid: States Made Multiple 

Program Changes, and Beneficiaries Generally Reported Access Comparable to Private 

Insurance, 

This report examines (1) the extent to which states provide mental health 

services to adult Medicaid beneficiaries through limited benefit plans, and 

(2) the steps states and CMS have taken to facilitate the coordination of 

GAO-13-55 (Washington, D.C.: Nov. 15, 2012).

5

For purposes of this report, we define “limited benefit plans” as health plans that contract 

with states on a capitated basis to provide mental health services to adult Medicaid 

beneficiaries, which we define as individuals 18 years and older.

6

See GAO, Medicaid: States Use of Managed Care, GAO-12-872R (Washington, D.C.: 

Aug. 17, 2012).
 

Page 3 GAO-13-780 Medicaid Managed Care and Mental Health

mental and physical health care services for adult Medicaid beneficiaries 

enrolled in limited benefit plans.

To determine the extent to which states provide mental health services to 

adult Medicaid beneficiaries through limited benefit plans, we collected 

and analyzed Medicaid enrollment and payment data for fiscal year 2012 

from all of the 13 states that contracted with limited benefit plans to 

provide mental health services to adult Medicaid beneficiaries on a 

capitated basis.7 We identified these states by reviewing CMS’s most 

recent Medicaid managed care enrollment report and interviewing CMS 

officials,8

To determine the steps that states and CMS have taken to facilitate the 

coordination of mental and physical health care services, we interviewed 

officials and reviewed relevant documents from selected states and CMS. 

To obtain information on state actions, we selected four states—Florida, 

Kansas, Michigan, and Washington—that varied in terms of (1) the 

percentage of Medicaid beneficiaries enrolled in limited benefit plans 

providing mental health services, (2) the size of their Medicaid programs, 

and (3) geographic location. (See app. I for more information on program 

characteristics of the selected states.) For these states, we collected and 

reviewed relevant documents for fiscal years 2011 and 2012, including 

state contracts with limited benefit plans, and findings from reviews 

conducted on limited benefit plans. We also interviewed officials from the 

selected states and external stakeholders, including the National Quality 

Forum and the National Association for Mental Illness, to collect 

information on the steps states have taken to facilitate the coordination of 

mental and physical health care services. To determine the steps CMS 

has taken to facilitate the coordination of mental and physical health care 

and sent the 13 states a data collection instrument we 

developed. Additionally, we obtained information on how these states 

collected the reported data and checks they performed to ensure 

accuracy. Based upon states’ responses, we determined that data 

collected were sufficiently reliable for our purposes.

 

7

We asked the 13 states to provide enrollment and payment data for adult beneficiaries in 

limited benefit health plans providing mental health services. We did not request 

enrollment and payment data separately for the different adult population groups enrolled 

in these plans, such as individuals who are aged, blind, disabled, or have developmental 

disabilities.

8

Centers for Medicare & Medicaid Services, Medicaid Managed Care Enrollment Report: 

Summary Statistics As of July 1, 2011 (Baltimore, Md.).
 

Page 4 GAO-13-780 Medicaid Managed Care and Mental Health

services for adult Medicaid beneficiaries enrolled in limited benefit plans, 

we reviewed relevant federal waiver applications,9

We conducted this performance audit from October 2012 to September

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

state contract review 

results, and regional monitoring guidance. We also interviewed officials 

from CMS’s central office and the four regional offices responsible for 

overseeing the four selected states.

CMS and states jointly administer the Medicaid program. States have 

flexibility within broad federal parameters for designing and implementing 

their Medicaid programs. For example, state Medicaid programs must 

cover certain populations and benefits—known as mandatory populations 

and benefits—but may choose to also cover other populations and 

benefits—known as optional populations and benefits.10

 

9

States seeking to provide mental health services through limited benefit plans may do so 

by obtaining a waiver of certain Medicaid requirements under sections 1915(b) or 1115 of 

the Social Security Act. States seeking to provide such services under a waiver must 

submit an application to CMS for approval.

Also, states may 

choose different payment and delivery systems to provide benefits to 

Medicaid beneficiaries, such as fee-for-service or managed care. Under a 

fee-for-service system, health care providers claim reimbursement from 

state Medicaid programs for services rendered to Medicaid beneficiaries. 

Under a Medicaid managed care system, states contract with managed 

care organizations to provide or arrange for medical services, and 

prospectively pay the organizations a per person, or capitated, payment. 

In turn, the managed care organizations pay providers, such as hospitals 

and physicians, for services provided to Medicaid enrollees. States 

contract with managed care organizations to provide a comprehensive set 

10Mandatory Medicaid benefits include, for example, inpatient hospital and physician 

services which can encompass the delivery of mental health services. Federal law does 

not contain explicit provisions concerning the exact types of mental health services that 

can be provided, but all state Medicaid programs provide some mental health services to 

beneficiaries. 

Background 
 

Page 5 GAO-13-780 Medicaid Managed Care and Mental Health

of services to Medicaid beneficiaries; states may also contract with limited 

benefit plans to provide a defined set of services, such as mental health 

services. CMS reviews and approves states’ plans to implement their 

Medicaid programs.

Medicaid is an important source of mental health services for millions of 

vulnerable individuals. In 2009, an estimated 5.8 million adult Medicaid 

beneficiaries, or 30 percent of all adult Medicaid beneficiaries, were 

diagnosed with some type of mental illness.11 States that provide mental 

health services through limited benefit plans establish these delivery 

systems under Medicaid waivers. Sections 1115 and 1915(b) of the 

Social Security Act allow the Secretary of Health and Human Services to 

waive certain federal requirements, such as limitations on a state’s ability 

to require certain beneficiaries to enroll in managed care.12 States that 

provide Medicaid benefits through managed care arrangements, including 

limited benefit plans, must comply with certain requirements, including 

those requiring states to establish procedures to monitor managed care 

program operations.13 Federal regulations require states to ensure that 

managed care organizations coordinate mental and physical health care 

services; however, states have the option to exempt limited benefit plans 

from these requirements.14

 

11Estimates based on special tabulation from the 2009 National Survey on Drug Use and 

Health provided by Substance Abuse and Mental Health Services Administration, 

September 2013.

States seeking to provide Medicaid services 

through managed care waivers must submit an application to CMS and 

obtain approval. Medicaid managed care waivers approved under 

section 1915(b) of the Social Security Act—the most common type of 

waiver states use to establish limited benefit plans to provide mental 

health services to beneficiaries—are typically authorized for a period of 

two years. At the end of the waiver period, the state can request an 

extension of the waiver or submit an application for a new waiver.

1242 U.S.C. §§ 1315(a), 1396n(b).

13Federal requirements describe two types of limited benefit plans: prepaid inpatient 

health plans (PIHPs) and prepaid ambulatory health plans (PAHPs). In general, PIHPs 

provide inpatient and outpatient services, whereas PAHPs provide ambulatory services. 

See 42 CFR pt. 438.

1442 C.F.R. § 438.208(a)(2). None of the four states we reviewed exempted limited benefit 

plans from this requirement.
 

Page 6 GAO-13-780 Medicaid Managed Care and Mental Health

Care coordination is broadly defined as the integration of patient care 

activities between two or more providers involved in a patient’s care with 

the goal of facilitating the appropriate delivery of services. Activities to 

coordinate mental and physical health care services include sharing 

information—such as medical records, test and lab results, and 

prescribed medications—across providers and care delivery sites. States 

and limited benefit plans can implement specific care practices with the 

purpose of facilitating communications and the sharing of information. 

Care coordination is particularly important for Medicaid beneficiaries with 

mental illnesses because they are more likely to have other medical 

conditions requiring ongoing physical health care services than 

beneficiaries without mental illnesses. For example, in 2003, 14 percent 

of all Medicaid beneficiaries had a costly medical condition, such as 

diabetes and heart disease; however, among adults who were receiving 

mental health services, 21 percent had such medical conditions.15

Across the 13 states that contracted with limited benefit plans to provide 

mental health services to adult Medicaid beneficiaries, the enrollment 

levels, total payments, and services provided varied.16 States can enroll 

different adult populations—such as individuals who are blind, disabled, 

or have developmental disabilities—in limited benefit plans, which could 

contribute to variation in the number of adults enrolled, as well as the 

level of capitated payments states made to these plans.17

 

15See Substance Abuse and Mental Health Services Administration, Mental Health and 

Substance Abuse Services in Medicaid, 2003: Charts and State Tables, HHS Publication 

No. (SMA) 10-4608 (Rockville, Md.: 2010).

State officials 

reported that about 4.4 million adult Medicaid beneficiaries were enrolled 

in limited benefit plans, about 48.6 percent of all adult Medicaid 

beneficiaries in the 13 states. The number of adults enrolled in these 

plans ranged from about 93,000 beneficiaries in Kansas to over 

1.1 million beneficiaries in Pennsylvania. (See fig. 1.) Across these 

16We collected data from the 13 states—Arizona, Colorado, Florida, Iowa, Kansas, 

Massachusetts, Michigan, New Mexico, North Carolina, Oregon, Pennsylvania, Utah, and 

Washington—that contracted with limited benefit plans to provide mental health services 

to adult Medicaid beneficiaries—individuals 18 years and older.

17States also have flexibility in setting eligibility criteria for limited benefit plans providing 

mental health services. For example, a state can choose to enroll all Medicaid 

beneficiaries in limited benefit plans, or establish enrollment criteria for limited benefit 

plans and enroll those beneficiaries that meet such criteria.

Enrollment, Payment, 

and Scope of Services 

Varied Across All 13 

States Using Limited 

Benefit Plans for 

Mental Health 

Services 
 

Page 7 GAO-13-780 Medicaid Managed Care and Mental Health

13 states, the percentage of adult Medicaid beneficiaries enrolled in 

limited benefit plans ranged from about 10.7 percent in Florida to about 

93.0 percent in Colorado. (See app. II for more information on enrollment 

in Medicaid and limited benefit plans in the 13 states.)

Figure 1: Number of Adult Medicaid Beneficiaries and Number of Adult Medicaid Beneficiaries Enrolled in Limited Benefit 

Plans Providing Mental Health Services, Fiscal Year 2012

Note: Enrollment data are for unduplicated adult Medicaid beneficiaries—individuals 18 years and 

older—in fiscal year 2012. Beneficiaries who enrolled more than one time during the year are 

reported only once in the unduplicated total.

Capitated payments to limited benefit plans providing mental health 

services to adult Medicaid beneficiaries also varied across the 13 states 

in fiscal year 2012. State officials reported that capitated payments to 

these plans totaled about $5.6 billion, or about 9.0 percent of total 

Medicaid payments for all adult beneficiaries in these 13 states. Capitated 

payments to these plans ranged from about $86.5 million in New Mexico 

to almost $2.0 billion in Michigan. As a share of total Medicaid payments 
 

Page 8 GAO-13-780 Medicaid Managed Care and Mental Health

for adult Medicaid beneficiaries, capitated payments to limited benefit 

plans providing mental health services ranged across the 13 states from 

1.3 percent in Florida to 21.9 percent in Michigan (see fig. 2). (See app. III 

for more information on Medicaid payments in the 13 states.)

Figure 2: Percent of Total Medicaid Payments to Limited Benefit Plans Providing Mental Health Services, Fiscal Year 2012

Note: Total Medicaid payments are for adult Medicaid beneficiaries—individuals 18 years and older. 

Payments to limited benefit plans are capitation payments—a fixed dollar amount per adult Medicaid 

beneficiary per month.

States also reported variations in the scope of services provided by 

limited benefit plans to adult Medicaid beneficiaries in fiscal year 2012. 

Specifically, 3 states contracted with limited benefit plans to provide only 

mental health services, while 10 states contracted with limited benefit 

plans to provide both mental health services and services for substance 

use disorder. Two of these 10 states—Oregon and Utah—contracted with 

some plans to provide only mental health services and contracted with 

other plans to provide both mental health services and services for 

substance use disorders. (See table 1.)
 

Page 9 GAO-13-780 Medicaid Managed Care and Mental Health

Table 1: Scope of Services Provided by Limited Benefit Plans by State, Fiscal Year 

2012

State 

Contracted with plans that 

provide only mental health 

services

Contracted with plans to 

provide both mental health 

services and services for 

substance use disorders

Arizona X 

Colorado X 

Florida X 

Iowa X 

Kansas X 

Massachusetts X 

Michigan X 

New Mexico X 

North Carolina X 

Oregon X X 

Pennsylvania X 

Utah X X 

Washington X 

Source: GAO analysis of state reported data.

Note: Scope of services limited benefit plans were contracted to provide care for adult beneficiaries—

individuals 18 years and older.

The four selected states we studied generally took three steps to facilitate 

the coordination of mental and physical health care services, but specific 

activities varied. CMS’s efforts to facilitate the coordination of mental and 

physical health care services focused primarily on reviewing states’ 

federal waiver documents and contracts with limited benefit plans.

Selected States 

Generally Took Three 

Steps to Facilitate 

Coordination of Care, 

and CMS Reviewed 

Waivers and 

Contracts 
 

Page 10 GAO-13-780 Medicaid Managed Care and Mental Health

The steps that selected states—Florida, Kansas, Michigan, and 

Washington—generally took to facilitate the coordination of mental and 

physical health care included (1) incorporating care coordination 

requirements in the contracts with limited benefit plans; (2) implementing 

additional steps to coordinate care; and (3) monitoring limited benefit 

plans’ implementation of care coordination.

The four states’ contracts with limited benefit plans included general 

provisions regarding the types of entities that health plans are required to 

coordinate with in order to manage beneficiaries’ health care needs. 

Additionally, each state’s contracts specified the particular coordination 

activities the limited benefit plans were required to perform.

General Contractual Provisions on Coordination

All four states required limited benefit plans to coordinate mental and 

physical health services with a broad range of providers and other 

entities. Each state required its limited benefit plans to coordinate with 

physical health care providers and community organizations, mental 

health providers, and the state’s Medicaid agency.

All four states required some coordination with physical health care 

providers and community organizations. For example, in Michigan, in 

addition to coordinating with beneficiaries’ primary care providers, 

limited benefit plans were required to coordinate with public and 

private community agencies that provide social support and other 

non-health care services to individuals with mental illnesses.

States’ contracts also required limited benefit plans to coordinate with 

a wide range of mental health providers that were part of the plans’ 

network of providers, including mental health providers and case 

managers that provide ancillary services. For example, Washington 

required its limited benefit plans to coordinate with social workers to 

ensure that they shared information on health care needs and 

services. 

States also required health plans to coordinate with other state 

departments and agencies whose clients include Medicaid 

beneficiaries. For example, Florida required its limited benefit plans to 

have agreements with state agencies responsible for serving the 

homeless to ensure coordination and avoid duplication of services. In 

Kansas, the state required limited benefit plans to coordinate with 

other state agencies, along with local and regional agencies whose 

Four Selected States Took 

Steps to Facilitate the 

Coordination of Mental 

and Physical Health Care 

Services

Care Coordination 

Requirements in State 

Contracts with Plans
 

Page 11 GAO-13-780 Medicaid Managed Care and Mental Health

clients included Medicaid beneficiaries. Michigan required its limited 

benefit plans to coordinate with the criminal justice system, including 

police/sheriffs, court personnel, and attorneys.

Specific Contractual Requirements for Coordination

All four states’ contracts with limited benefit plans required the plans to 

undertake specific activities to facilitate coordination of mental and 

physical health care services. These required activities generally fell into 

the following categories: sharing information and establishing 

communications between providers and across care settings; identifying 

patients’ mental and physical health care needs and creating individual 

care plans; and developing measures and collecting data on coordination 

of care.

All four states required limited benefit plans to implement mechanisms 

to share information or standardize communications between 

providers and across care settings. For example, contracts in Florida, 

Michigan, and Washington required limited benefit plans to develop 

written plans or agreements outlining when, and in some cases how, 

care will be coordinated between mental health, primary care, and 

other providers. Kansas’ contract required all limited benefit plan 

network providers to request a standardized release of information 

form from each beneficiary to allow providers to coordinate with 

primary care physicians and other treatment team members.

All four states required limited benefit plans to identify beneficiaries’ 

health care needs, including mental and physical health care needs; 

develop individual care plans for beneficiaries’ to address all needs 

identified; and update these care plans on a regular basis. One part of 

the individual care plan development and updating process included 

coordinating with primary care and other providers as needed, and 

making appropriate referrals. For example, Washington’s contract 

required limited benefit plans to create and then update these plans 

every 180 days, identify patient mental and physical health care 

needs, ensure coordination between systems that are meeting 

patients’ needs, and require providers to make appropriate referrals to 

health care providers when medical concerns are identified.

Two of the four states required limited benefit plans to collect and 

submit data to monitor care coordination. For example, Kansas 

required limited benefit plans to collect data from network providers 

and enrollees to monitor care coordination; and Florida required 

limited benefit plans to collect information on follow-up services 
 

Page 12 GAO-13-780 Medicaid Managed Care and Mental Health

enrollees received within seven days of discharge from all inpatient 

facilities for a mental health diagnosis.

Officials from all four states reported taking additional steps beyond 

contract requirements to encourage coordination and further integration of 

mental and physical health care. For example, in 2012, officials from all 

four states reported that their state implemented Medicaid policies 

allowing providers to bill for two services, such as mental and physical 

health care services, in one day for the same beneficiary. In doing so, 

limited benefit plans can work to integrate and improve access to care by 

providing mental and physical health services at the same location and 

allowing both providers to receive reimbursement for services furnished 

on the same day. Since 2012, officials from two of the four states reported 

that they have taken steps to further integrate mental and physical health 

care services. Officials from Kansas reported that in January 2013 the 

state stopped providing mental health services through a limited benefit 

plan and implemented a comprehensive managed care arrangement 

providing both mental and physical health care services to Medicaid 

beneficiaries, and officials from Florida reported that the state is taking 

steps to implement similar arrangements in 2014.

During 2011 and 2012, all four states we studied conducted a variety of 

reviews that were either directly focused on the coordination of mental 

and physical health care services or assessed such coordination as part 

of broader reviews. States conducted monitoring through five different 

types of reviews, the use of which varied by state.

Desk reviews are state Medicaid agency evaluations of documents 

and reports that plans, including limited benefit plans, submit. States 

generally conduct these types of reviews at their Medicaid offices. All 

four states reported that they conduct some form of desk review of 

reports and data related to the coordination of mental and physical 

health care services received under limited benefit plans. The states 

did not issue reports on the findings of these desk reviews.

External quality reviews (EQR) are federally required reviews 

conducted by independent organizations, called External Quality 

Review Organizations (EQROs), with expertise in assessing the 

quality of and access to care provided by managed care plans. 

Federal law requires EQROs to annually review Medicaid managed 

Additional State Steps to 

Encourage Care Coordination 

State Monitoring of Limited 

Benefit Plan Performance 
 

Page 13 GAO-13-780 Medicaid Managed Care and Mental Health

care plans, including limited benefit plans that provide inpatient 

services.18 These reviews assess limited benefit plans’ strengths and 

weaknesses with respect to quality, timeliness, and access to health 

care services provided to Medicaid beneficiaries. All three states in 

which limited benefit plans were subject to these reviews—Florida, 

Michigan, and Washington—had EQRs conducted that included an 

assessment, in either 2011 or 2012, of limited benefit plans’ 

compliance with care coordination contract requirements.19 In 

Michigan, the EQR findings did not include any specific results on 

care coordination in 2011, but found that the state and limited benefit 

health plans were in compliance with managed care requirements and 

contractual agreements.20 In Washington, the EQR findings in 2011 

questioned the effectiveness of one limited benefit plan’s intervention 

to increase the quality of care coordination, including the validity of the 

methods used to assess care coordination. In Florida, officials 

reported that the EQR is conducted annually in conjunction with two 

process improvement projects. One limited benefit plan in this state 

participated in a project that examined the documentation of services 

in an effort to improve communication and coordination of services 

between physical and mental health providers in limited benefit plans. 

This project is still ongoing.

Internal onsite reviews are reviews conducted by the state Medicaid 

agency at providers or managed care plan offices, or at locations 

where Medicaid beneficiaries receive services. Three of the four 

states—Florida, Michigan, and Kansas—conducted onsite reviews 

during the 2011 through 2012 time period. Florida officials reported 

that the state conducted onsite reviews annually to evaluate limited 

benefit plans’ administrative and clinical compliance, including care 

coordination. Some of these reviews identified needed improvements; 

for example, in a 2012 review of one limited benefit plan in Florida, the 

 

18Federal law requires states contracting with managed care organizations and PIHPs to 

ensure these entities undergo an annual EQR to monitor compliance with certain 

managed care standards and requirements. PAHPs are exempt from this requirement. 

42 U.S.C. § 1396u-2(c)(2); 42 C.F.R. § 438.350.

19Kansas provided mental health services through a PAHP and was exempt from EQR 

requirements.

20Michigan’s contractor did not conduct any compliance monitoring activities during the 

2010-2011 reporting period. This report presented a summary of previously reported 

results for 2009-2010 compliance monitoring reviews.
 

Page 14 GAO-13-780 Medicaid Managed Care and Mental Health

state found that the plan needed to establish a process for providing 

Medicaid beneficiaries immediate access to psychiatric services upon 

their release from a jail or juvenile detention facility to ensure 

prescribed medications were available. Michigan officials reported that 

their reviews occurred biennially and, in part, assessed limited benefit 

plans’ capacity to coordinate physical and mental health services for 

Medicaid beneficiaries. Some of these reviews identified needed 

improvements; for example, in a 2011 review of one limited benefit 

plan, the state was unable to find evidence of communication and 

coordination between a psychiatric hospital and a Medicaid 

beneficiary’s primary care physician or health plan and recommended 

that the limited benefit plan devise a coordination plan. In 2011 and 

2012, Kansas conducted an onsite review of the one limited benefit 

plan that state contracted with to examine plan guidelines used to 

identify and authorize the coordination of care for beneficiaries with 

high needs, including those with certain mental health diagnoses. In 

regard to care coordination, the state found that the limited benefit 

plan met its contractual requirements and had an acceptable process 

to identify Medicaid beneficiaries with high physical and mental health 

needs, and provided these beneficiaries with ongoing care 

coordination between their mental health providers and other 

providers and entities delivering treatment and service. State 

reviewers also found that the plan had coordinated its activities with 

other social service, disability, and welfare systems, including the 

state’s criminal justice and disability agencies.

Independent assessments are federally required reviews through 

which states operating Medicaid managed care programs under 

section 1915(b) waivers must evaluate and maintain data regarding 

the cost-effectiveness of their programs, the effect of the programs on 

beneficiaries’ access to services, and the quality of services provided 

under the program.21

 

2142 C.F.R. § 431.55. Centers for Medicare & Medicaid Services, Independent 

Assessment Requirement for Section 1915(b) Waiver Programs: Guidance to States 

(Dec. 22, 1998).

At a minimum, a state is required to conduct an 

independent assessment for its first two waiver periods. Of the four 

states, Kansas was the only state required to conduct an independent 

assessment during the time period of our review because it began 

providing mental health services through a contract with a limited 

benefit plan under a waiver in 2007. Kansas’ 2009 assessment found 

that a small percentage of Medicaid beneficiaries enrolled in the 
 

Page 15 GAO-13-780 Medicaid Managed Care and Mental Health

limited benefit plan received care coordination, and recommended 

that the state should increase the share of beneficiaries receiving 

these services.22 The 2011 assessment found improvement in the 

state’s care coordination. Specifically, the report noted that the state 

expanded and enhanced its care coordination activities in an effort to 

increase the share of Medicaid beneficiaries in the limited benefit plan 

whose care was coordinated.

Focused care coordination studies examine a state’s coordination of 

mental health and physical health care services. Michigan was the 

only state to conduct a focused care coordination study of limited 

benefit plans during the time period of our review. The study, which 

was conducted by an independent organization under contract, 

examined Medicaid utilization patterns to assess whether care 

coordination occurred. While the report did not draw specific 

conclusions on whether care coordination occurred or make 

recommendations to the state, it did indicate that Medicaid 

beneficiaries with serious mental health diagnoses had more 

emergency room, ambulatory visits, and inpatient admissions than 

other groups.

GAO found that CMS did not take direct steps to facilitate the 

coordination of mental and physical health care services for adult 

Medicaid beneficiaries enrolled in limited benefit plans because its role is 

to provide oversight of, and technical assistance to, the states in carrying 

out their Medicaid programs. In its oversight role, the agency reviewed 

and approved state-submitted managed care waiver applications and 

contracts with limited benefit plans providing mental health services, 

some of which contain care coordination provisions. Federal regulations 

require managed care plans to coordinate mental and physical health 

care services and identify persons with special health care needs. 

However, states providing health care services through limited benefit 

plans may exempt these plans from these requirements.23

 

22The scope of our study included fiscal years 2011 and 2012. However, we collected and 

reviewed Kansas’ 2009 assessment, because the 2011 assessment followed-up on 

findings from the earlier assessment.

States 

requiring limited benefit plans to comply with these requirements must 

23See 42 U.S.C. § 438.208(a)(2). None of the four states we reviewed exempted limited 

benefit plans from this requirement.

CMS Reviewed State 

Waiver Applications and 

Contracts with Limited 

Benefit Plans
 

Page 16 GAO-13-780 Medicaid Managed Care and Mental Health

include these details in their waiver applications and assure that plans 

comply with these rules. CMS officials told us that the agency reviews the 

waiver application’s care coordination provisions as part of its broader 

review of states’ waiver applications. The officials added that CMS also 

reviews the results of EQRs of states’ programs, and provides final 

agency approval for contracts between states and limited benefit plans. 

Beyond these activities, CMS officials indicated that their role was to 

provide technical assistance to states, as needed; for example, when 

states are designing their programs.

CMS’s regional offices also provided oversight of states’ contracting with 

limited benefit plans; however, none of their activities directly assessed 

care coordination provided by limited benefit plans. In the four regional 

offices we studied, we found that the number and frequency of regional 

office reviews of limited benefit plans varied.24 Regional officials we spoke 

to cited several activities ranging from periodic managed care calls with 

states, to comprehensive and focused onsite and desk reviews to ensure 

limited benefit plans met all federal managed care requirements. Officials 

in one region explained that CMS generally conducted additional regional 

office reviews on limited benefit plans that were newer or raised special 

concerns.

The Department of Health and Human Services reviewed a draft of this 

report and provided technical comments, which we incorporated as 

appropriate.

We are sending copies of this report to the Secretary of Health Human 

Services and other interested parties. In addition, the report is available at 

no charge on the GAO website at http://www.gao.gov. 

 

24The number and frequency of regional office reviews varied based upon the number of 

limited benefit plan contracts in each state and whether the states utilized a standard 

contract across plans, in which case a regional office may have only reviewed the 

standard contract once.

Agency Comments
 

Page 17 GAO-13-780 Medicaid Managed Care and Mental Health

If you or your staff have any questions about this report, please contact 

me at (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made major contributions to this report 

are listed in appendix IV.

Carolyn L. Yocom

Director, Health Care
Appendix I: Summary of Selected States’ Use 

of Limited Benefit Plans to Provide Mental 

Health Services, Fiscal Year 2012

Page 18 GAO-13-780 Medicaid Managed Care and Mental Health

Program characteristic Florida Kansas Michigan Washington

Year limited benefit plan was first implemented 1996 2007 1998 1993

Number of contracts with limited benefit plans 10 1 18 13

Scope of services that limited benefit plans were 

contracted to provide to adult Medicaid 

beneficiariesa

Mental health 

services

Mental health 

services

Mental health services 

and services for 

substance use disorder

Mental health 

services

Number of adult Medicaid beneficiaries 2,021,882 177,449 1,061,587 693,719

Number of adult Medicaid beneficiaries enrolled in 

limited benefit plans providing mental health 

servicesb

215,303 92,938 131,671 541,225

Percent of adult Medicaid beneficiaries enrolled in 

limited benefit plans

10.65% 52.37% 12.40% 78.02%

Number of adult Medicaid beneficiaries enrolled in 

limited benefit plans that received at least one service 32,098 29,588 126,778 70,060

Source: GAO analysis of CMS and state reported data.

a

Adult Medicaid beneficiaries are individuals 18 years and older.

b

States have flexibility in setting eligibility criteria for limited benefit plans providing mental health 

services. States can choose to enroll all Medicaid beneficiaries in limited benefit plans, or establish 

enrollment criteria for limited benefit plans and enroll those beneficiaries that meet such criteria. For 

example, in Michigan Medicaid beneficiaries seeking more than 20 outpatient visits to address their 

mental health needs are enrolled in limited benefit plans.

Appendix I: Summary of Selected States’ Use 

of Limited Benefit Plans to Provide Mental 

Health Services, Fiscal Year 2012
Appendix II: Adults Enrolled in Medicaid and 

Limited Benefit Plans Providing Mental Health 

Services, Fiscal Year 2012

Page 19 GAO-13-780 Medicaid Managed Care and Mental Health

State 

Number of adult 

beneficiaries 

enrolled in Medicaid

Number of adult 

Medicaid

beneficiaries 

enrolled in limited 

benefit plans 

providing mental 

health services

Beneficiaries enrolled 

in limited benefit plans 

providing mental 

health services as a 

share of total adult 

beneficiaries enrolled 

in Medicaid (percent)

Arizona 905,958 780,049 86.10%

Colorado 253,623 235,847 92.99

Florida 2,021,882 215,303 10.65

Iowa 343,213 220,989 64.39

Kansas 177,449 92,938 52.37

Massachusetts 832,855 210,833 25.31

Michigan 1,061,587 131,671 12.40

New Mexico 235,294 155,820 66.22

North Carolina 621,387 241,761 38.91

Oregon 337,905 314,825 83.31

Pennsylvania 1,384,689 1,140,832 82.39

Utah 161,865 125,619 77.61

Washington 693,719 541,225 78.02

Total 9,071,426 4,407,712 48.59%

Source: GAO analysis of state reported data.

Note: Enrollment data are for unduplicated adult Medicaid beneficiaries—individuals 18 years and 

older—in fiscal year 2012. Beneficiaries who enrolled more than one time during the year are 

reported only once in the unduplicated total. States can enroll different adult populations—such as 

individuals who are blind, disabled, or have developmental disabilities—in limited benefit plans, which 

could contribute to variation in the number of adults enrolled in these plans.

Appendix II: Adults Enrolled in Medicaid and 

Limited Benefit Plans Providing Mental 

Health Services, Fiscal Year 2012 
Appendix III: Total Medicaid Payments and 

Capitated Payments to Limited Benefit Plans 

for Adults, Fiscal Year 2012

Page 20 GAO-13-780 Medicaid Managed Care and Mental Health

State 

Total Medicaid 

payments (dollars)

Total capitated 

payments to 

limited benefit 

plans providing 

mental health 

services (dollars)

Total capitated

payments to limited 

benefit plans 

providing mental 

health services as a 

share of total Medicaid 

payments (percent)

Arizona $5,247,777,549 $818,480,488 15.60%

Colorado 2,639,786,248 151,333,340 5.73

Florida 6,885,414,675 90,850,448 1.32

Iowa 2,519,319,401 90,332,042 3.59

Kansas 1,830,720,329 86,756,599 4.74

Massachusetts 6,645,146,452 308,656,503 4.64

Michigan 9,017,361,836 1,975,853,600 21.91

New Mexico 1,771,298,790 86,483,081 4.88

North Carolina 6,071,247,483 302,281,898 4.98

Oregon 1,818,946,739 152,034,715 8.36

Pennsylvania 13,145,125,395 1,295,669,270 9.86

Utah 1,134,377,096 106,341,638 9.37

Washington 3,020,009,857 $103,594,864 3.43

Total $61,746,531,849 $5,568,668,486 9.02%

Source: GAO analysis of state reported data.

Note: Total Medicaid payments and capitated payments to limited benefit plans are for adult 

beneficiaries—individuals 18 years and older. States can enroll different adult populations—such as 

individuals who are blind, disabled, or have developmental disabilities—in limited benefit plans, which 

could contribute to variation in the level of capitated payments made to these plans.

Appendix III: Total Medicaid Payments and 

Capitated Payments to Limited Benefit Plans

for Adults, Fiscal Year 2012 
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 21 GAO-13-780 Medicaid Managed Care and Mental Health

Carolyn L. Yocom, (202) 512-7114 or yocomc@gao.gov

In addition to the contact named above, Tim Bushfield, Assistant Director; 

Shaunessye Curry; Kristin Ekelund; Sandra George; and Drew Long 

made key contributions to this report.

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(291067)
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